Markets, Politics, and Globalization: Can the Global Economy Be Civilized?

Abstract

A great deal of nonsense has been written and said about globalization in recent years. Some has come from political right, some from political left, some from business and political leaders, some from non-governmental organizations (NGOs) and people in streets. The term globalization has become so slippery, so ambiguous, so subject to misunderstanding and political manipulation that it should be banned from further use, at least until there is precise agreement as to its meaning. In particular, those involved in economic and political policymaking and debate must clarify their meaning and their messages in this sphere if they are to be taken seriously. The term globalization confuses two discrete phenomena. The first is shrinkage in space and in time that world has experienced in consequence of technological revolutions in transport, communications, and information processing. Although these developments have not affected all countries or people uniformly, world has for many become a much smaller place. References to our village or spaceship Earth or, more prosaically, the global economy capture reality that actions and decisions in one part of world have greater impact on other parts of humanity and do so with greater speed than was experienced in years past. The behavior of world's interrelated twenty-four-hours-a-day financial markets typifies this trend. This new globalization has bred more detailed and up-to-date knowledge of people's activities. But income and wealth imbalance have also created totally unbalanced information flows and what C. P. Snow has described as ultimate obscenity: rich sitting in comfort of their living rooms watching other people starve on color television. This new technology-driven globalization is new reality to which we all are trying to adapt. And there truly is no escape from it. The second usage of globalization relates to matters of human policy choice-the degree to which one mindlessly submits oneself to surrounding external forces. Individuals, firms, governments, and NGOs all have choices. While globalization in first meaning is a fact, and it may constrain some choices, it does not totally foreclose them in way that many imply. One cannot argue--in sense of being for or against globalization--with globalization as fact, although one can like it or dislike it. To equate globalization with external liberalization and full reliance on global marketplace magic, however, is logical confusion and quite misleading. It is certainly convenient for those pushing an external liberalization agenda to be able to depict it as an inescapable concomitant of globalization fact. But globalization (the fact) and external liberalization are logically quite distinct. Globalization (the fact) will proceed more quickly if all countries externally liberalize-that is, open to world-their goods, services, and factor markets, including their labor markets. Liberalization enthusiasts, as they preach virtues of full and free mobility of capital, are generally reticent about discussing latter. The trend toward external liberalization in recent decades has undoubtedly accelerated pace of globalization. This recent association of externa l liberalization policies with technology-driven fact of globalization has contributed to deplorable logical and terminological confusion to which I have referred. External liberalization policies involve political, economic, and social choices. The effects of liberalization and opening up are not agreed and uniform for all places and times. [1] The challenge--both at national and global levels-is, through conscious policy choices, to make new globalized system work for maximum human welfare. The task before us is to make globalization functional, to civilize it. There are few, if any, reputable developing country analysts or governments that question positive potential roles of international trade or capital inflow in economic growth and overall development. …